News from Middle East Impacts More Than Just Gas Prices

Mortgage markets improved slightly last week, rebounding from the worst 1-week loss in recent history. It was the result of instability in the Middle East region. Economic data was overlooked as investors made a broad-based flight-to-quality.  Wild how what we think we know is proven to be irrelevant when the national news matters more.

For just the second time in 2011, conforming mortgage rates in Iowa fell on a week-to-week basis.

Honestly, rates shouldn’t have dropped. Here’s just a sampling of last week’s economic data, all of which can be tied to rising mortgage rates:

• Oil prices are soaring on supply concerns
• The Producer Price Index touched a 2-year high
• Philadelphia Fed Manufacturing Survey predicted strong Q1 growth

Furthermore, the just-released January FOMC Minutes showed an improving economic outlook from members of the Federal Reserve.

What is “Safe Haven” Buying?

Home buyers and rate shoppers might consider last week’s rate drop a gift. Without the growing unrest in Libya, Egypt and Tunisia, mortgage rates would have moved considerably higher.

Instead, rates fell in a bout of what’s commonly known as “safe haven” buying.

In safe haven buying, global investors shun risk in favor of safer investments; usually in response to market uncertainty. Terror threats is one such event. Regime overthrow is another. Because the event’s long-term effect on markets is unknown, investors choose to move cash to safer asset classes until the future is more clear.  Hence the term “safe haven buying”.

The extra demand for such assets drives prices up and, in the case of mortgage markets, drives rates down.  Cool, right?

Specifically, What Did Those Reports Say?

Each week, I put up an economic calendar of news coming out that following week.   Here’s the what actually happened with those reports last week:

What Impacts Mortgage Rates?

If you’re looking to purchase or refinance a home, it’s important to know what moves mortgage rates.  There are normally two major things that impact the direction:

1. Economic News.  (Like the calendar above).
2. International News. (major events, pending legislation, war related news, etc).
3. Stock Market. (Money flows from equities (stocks) to bonds when it seeks shelter).

What Are Rates Based On?

It’s been mentioned before, but as a common reminder – mortgage rates are only based on one thing, Mortgage Backed Securities (MBS).  The only way you have access to these is through live bond quotes.

Looking For Mortgage Rates?

If you’re looking for specifically what mortgage rates are doing, I’d be happy to help with a custom rate quote.  Each scenario is different (there are 27 different factors a mortgage rate is determined by).  If you or someone you currently know are looking for a mortgage, I’m here to help!

Information without obligation.  That’s my policy.  If you like what you hear, my team and I would love to help you out with your mortgage!  Our contact information is on the top right hand side of this page!

Tagged as: Inflation, Mortgage Rates, Safe Haven Buying